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AEC 2012 - What Drives Foreign Direct Investments in Africa an Empirical Investigation with Panel Data

16-Oct-2012

This paper analyses factors that drive Foreign Direct Investments (FDI) in Africa. To do so, for the first time in the literature, the paper uses five-year panel data with the system-GMM technique, over the period 1970-2009 including 53 African countries. The main results are as follows: (a) Larger countries attract more FDI. (b) However, regardless of their size, more open countries, politically stable countries and countries offering higher return to investment also attract FDI. (c) FDI inflows are persistent in Africa. This suggests that countries that manage to attract FDI today are likely to attract more FDI in the future.

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